Oak Furniture provided the following information relevant to its sales for Decem

Question

Oak Furniture provided the following information relevant to its sales for December 2013 and the first quarter of 2014:

  
Based on the company's collection history, 6% of credit sales are uncollectible, 44% are collected in month of sale and the remainder collected in the following month.
Cash collections in January from December 2013 credit sales would be:

Dec. 2013 Jan. 2014 Feb. 2014 March 2014 (Actual) (Budgeted) (Budgeted) (Budgeted)   Credit sales $64,000 $144,000 $159,000 $114,000   Cash sales $14,000 $ 29,000 $ 34,000 $ 16,000

Explanation / Answer

Cash collections in January from December 2013 credit sales would be: 50% of credit sales in December

i.e 50% of $64000 = $32000

As 6% of credit sales are uncollectible, 44% are collected in month of sale and the remainder collected in the following month.

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